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Trading plan for 10/05/2018

Yesterday's recovery of risky currencies stopped on Thursday and the currency market is waiting steadily for fresh impulses. If USD is to continue to grow, it may need support in the data and investors seem to be expecting an afternoon CPI reading from the US. EUR/USD dropped to the level of 1.1820, USD/JPY climbs over 109.80. On the stock market, this is the day of recovery following the ups and downs in Europe and the US. Japanese Nikkei225 gains 0.5% and Hang Seng grows by 0.7%.

The tension on the Iran-Israel line is quickly returning. The financial media reports that Israel attacked targets in Syria after the Iranian forces fired at the Golan Heights. If the conflict finds a wider response in the world (with the participation of the US and Russia), geopolitical tensions may soon come to the surface. Crude oil is still under pressure of speculation about the impact of sanctions on Iran. WTI climbs to 71.70 USD, and Brent is at 77.77 USD.

On Thursday 10th of May, the main event is the Bank Of England interest rate decision, but the global investors should pay attention to CPI, Unemployment Claims, and Federal Budget Balance data from the US as well.

NZD/USD analysis for 10/05/2018:

The Reserve Bank of New Zealand kept the OCR rate unchanged at 1.75% as expected, but in the projection slipped the forecast of the first hike to a longer date in 2019. NZD weakened after this dovish RBNZ statement. The CPI forecast was also lowered to 1.6% from 1.8% in June 2019, so no inflationary pressure is being expected either. As regards the economic situation, the language of the monetary policy statement was neutral. In a speech to parliament, the president of RBNZ Orr stressed that the bank is maintaining a neutral attitude. He said that "the door remains open both for rate cuts and increases", although the increase is more likely.

Let's now take a look at the NZD/USD technical picture at the H4 timeframe after the interest rate decision was made. NZD/USD fell from 0.6980 to 0.6910 after the decision, and the scale of the move suggests closing the speculative positions waiting for hawkish surprises. The price has hit the 78% Fibo at the level of 0.6920 in extremely oversold market conditions and despite the growing bullish divergence. The supply side still has the control over this market, but there is a need for a corrective pullback towards the level of 0.6946 or 0.6982 soon. The key level to the upside is still seen at 0.7152.